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How to Spot and Develop Niche Markets

The last time I moved, I was looking for boxes on craigslist. I saw a guy posting an ad “$1 per box, I deliver anywhere in Portland”.

I thought to myself “Yeah–but there are all these postings for free boxes, why pay $1 if I can get them for free?” So I jotted down the time and address of one of the free boxes posts. I got there at 3:05–all the boxes were gone, and they said 5 people had come in the past 5 minutes. I realized the whole free box thing wasn’t going to fly because I had a lot of competition.

As I drove back home, I thought “Well, the store must sell them for cheaper than $1 each”. So I went to Fred Meyer. $2.69 per box. Granted they are nice clean new boxes, but do I really need that?

So I went home and called the first craigslist guy. He showed up the next morning at 10:30 and sold me 15 boxes for $15 dollars.

So, as I’m always curious about people’s business models, I asked him where he got his boxes–did he find them in dumpsters the way I used to in college?

He said no, he knows a guy in shipping at a major store who gives him his boxes each week for free. So he’s got a steady supply, and after he subtracts his gas and wear-and-tear expenses, he must make a profit, because he’s been doing it for 2 years.

At 15 boxes, I am probably one of the smallest of his clients. He’s said most 2 bedroom places take 50 boxes. That’s $50 for free, for the effort of marketing and driving around. And the transaction took all of 10 minutes, so he can probably fit a lot of deliveries into his day. He’s probably not going to retire on $1 a box – but it makes a decent side job.

So what is the moral here?

First, that I should have realized that my time is more valuable than spending $15 versus running around to garage sales and stores hunting for boxes. I should have called him the minute I saw the ad, because a little voice said “That’s a good deal!”

I’ve already long since given up moving my stuff by myself or roping in my friends. Hiring movers is well worth it–and buying boxes from a guy who delivers them to your door is even more worth it.

Second, it’s a good lesson in spotting a need and fulfilling it. This guy recognized that people need boxes, found a supplier, and bang he’s got a business.

Of course, he could take it even further. He could find a shipping supply company and buy boxes in bulk – if he could get them for, say $.30 each, it would still be a profit, and he could advertise that he offered brand-new, extra-sturdy boxes. Or he could branch out and find more free “suppliers” and cull out the more beat-up boxes, ensuring a standard of quality (some of the boxes he had were sub-par).

He could build a small webpage (a simple free website would be fine), and give some helpful tips about how many boxes it takes to move depending on the size of your place.

Or he could partner with moving companies and trade referrals. He could likely charge $2 per box and still get a lot of customers because he’s still cheaper than the store and he delivers. And if it turned out to be profitable and he gets more customers, he could hire others to do the deliveries and automate the operation.

So the steps to spot and develop viable businesses are:

1. Recognize that there are needs all around you and thus potential business opportunities all around you. Develop an eye for them (once you start looking you’ll see them everywhere). Have fun with it. I carry a notebook with me and jot down my ideas all the time. Just today I was talking with a colleague and we were discussing an idea to have a website where you could rent art for your apartment and have it in a queue like Netflix and every month someone would come in and rotate your art and hang the next one in your queue. I’d pay for that! Who wants to stare at the same art forever? Laziness creates many business opportunities!

2. The second step is to be able to recognize which business opportunities are profitable and would be fun to do. I personally think this takes practice. Jump in and start running with some of the ideas you came up with in #1. Start small for chrissake though, don’t mortgage your house. The first business I started was selling jewelry through my Beadage website. I quickly realized that I didn’t want to make a living by making jewelry all day. Boring. So I turned it into a content site and slowly built traffic and now make a tidy sum on AdSense. But the experience of starting a business was fun and I learned a lot (my first piece I sold to someone in Sri Lanka of all places – weird). The point is to jump in. The major thing people lack that keeps them from starting business is confidence.And that is something you can develop for free. (Well, sometimes therapy helps). But mostly confidence comes from experience and from the decision to believe in your own abilities. Anyone can be successful at business if they are willing to learn and practice. It’s not rocket science. If a guy with a truck and some boxes can do it, you can too.

3. While you are developing your business idea in #2, learn everything you can about marketing, money, and business. From the beginning, design your businesses with the idea that you will not be the one doing all the work. Automate your systems well and early (and forgive yourself when you don’t and you end up doing everything yourself until you realize you just can’t anymore: most of us have had to learn the hard way, me included). Keep building on your previous successes and you will have more cashflow for your newer, better ideas as they come to you. Rinse and repeat. Whee!